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Capital expenditures are the funds used to acquire or upgrade a company's fixed assets, such as expenditures towards property, plant, or equipment (PP&E). [3] In the case when a capital expenditure constitutes a major financial decision for a company, the expenditure must be formalized at an annual shareholders meeting or a special meeting of the Board of Directors.
The selection of the proper index to use depends on the industry in which it is applied. For example, while CE, M&S or IC Index are typically employed for chemical process industries, the ENR (Engineering News-Record) construction index is used for general industrial construction and takes in account the prices for fixed amounts of structural steel, cement, lumber and labor.
Tobin's q [a] (or the q ratio, and Kaldor's v), is the ratio between a physical asset's market value and its replacement value.It was first introduced by Nicholas Kaldor in 1966 in his paper: Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani.
Since the truck’s benefits are spread over the years that the truck is in use, we will want to spread the cost of the truck over those subsequent years as well. Otherwise the business would appear overly burdened in Year One and unnaturally profitable every year thereafter. Thus the truck is a capital expenditure which should be depreciated ...
Capital budgeting in corporate finance, corporate planning and accounting is an area of capital management that concerns the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization ...
In general, the WACC can be calculated with the following formula: [3] = = = where is the number of sources of capital (securities, types of liabilities); is the required rate of return for security ; and is the market value of all outstanding securities .
In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [1]
In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions.